In November 2004, my wife (Sofie) and I were driving back to Austin after visiting family for the Thanksgiving holidays in Oklahoma.
“You can really see all the mistletoe, now the leaves have fallen,” Sofie commented from the passenger seat, looking around and basically chilling out because, well, she wasn’t driving.1
“Maybe we should sell it online,” she continued, knowing the tradition of being kissed while under the mistletoe.
“Good idea, but I guess a lot of people already sell mistletoe online,” I replied.
Nevertheless, once we were home, I browsed mistletoe purchasing options.
“Hey Sofie, I only see one website that sells mistletoe,” I said, admittedly surprised.
Literally, Google only showed one result. Welcome to 2004.
In its early days, the internet was full of low hanging fruit, a new frontier of obvious ideas and unexploited opportunities. Take any product sold in a physical store and sell it online. Instant business.
By 2004, we mostly assumed everything that could be sold online was now a saturated, competitive market and few opportunities remained. Of course, this was untrue.
Case in point, I founded my M&A Research Database company in 2005. At the time, my company was at the forefront of technological innovation in our space.
YouTube was also founded in 2005 and essentially created an entirely new media platform.
Now, nearly two decades later, it’s still tempting to think the internet is a fully optimized, mature market – that all the good ideas are taken. Still untrue.
Here’s a general point to remember…
The best ideas haven’t been thought of yet.
There are so many new initiatives waiting to surface, concepts people have yet to consider. These new ideas, inventions, materials, processes, products, and services will seem extremely obvious, post-launch, but they don’t yet exist.
This holds for online businesses and for the entire business landscape at large, online and offline. There will always be opportunities to capitalize. Even companies making a succession of incremental improvements that sum to a differentiated product or service can compete in highly competitive markets.
Back to Mistletoe
Given the lack of online mistletoe storefronts, I agreed to design a basic one-page website, a conduit to sell mistletoe, if Sofie would handle the orders and fulfillment. And with that, we were in business.
Well, it’s all pretend business until customers actually order your product, which they did in this case. Almost instantly.
We began with two product variations and two corresponding price points – small & large.
Not long after, we offered two shipping options – standard & express (24 hours), mostly because a few potential customers asked if we could expedite their shipping. Standard shipping might delay a kiss. A tragedy.
Shortly thereafter, we offered an add-on option, Sofie’s idea, a red ribbon tied like a bow around the mistletoe. That was a nice touch.
It doesn’t sound like much, but in tweaking our product options, we unknowingly created a lot of product variations. One order might be:
- Small mistletoe + standard shipping + no ribbon
The next order:
- Large mistletoe + standard shipping + ribbon
- Small mistletoe + express shipping + no ribbon
When the orders started coming in, and they did, thanks to a small Google Adwords spend,2 we realized the logistics of product fulfillment is more difficult than one might think.
After taping the box closed, it’s easy to forget the product variation in it.
“Wait, does this product address label go on this box or that box?”
“And what did I just put in this box anyway?”
“When you put this box on the table, did you take it from the floor over there, or over there? Because, that stack on the floor over there was…”
When we hit 10+ orders per day, which doesn’t sound like a lot (because it isn’t), we realized it was getting a little complicated to track who ordered what. Keep in mind, we sort of just crammed this extra mistletoe bit into our spare evening hours, between working and tending to the baby.
I suddenly had a little more sympathy for all those screwed up burger orders in the past… the ones with onions and mustard. Who likes that stuff on their burger anyway?
We decided it would be more efficient to just put a large quantity of mistletoe in all the boxes, regardless of what the customer ordered. This reduced the product permutations by a factor of two. Brilliant.
When inbound orders reached 15 per day (again, not a lot), we decided to just expedite shipping for everyone. It cost us more but reduced the product permutations by another factor of two.
Shortly thereafter, everyone also got the red ribbon upgrade, whether they wanted it or not.
In other words, we simplified back to one product. Everyone got the same thing.
The people who ordered a large bundle of mistletoe with expedited shipping and a red ribbon received exactly what they ordered. They were happy.
The people who ordered a small bundle of mistletoe with standard shipping and no ribbon got more than they were expecting and quicker than expected, an expedited kiss.3
Oddly, customers could still pay extra to upgrade – to expedite shipping and include the ribbon. It bothered me that the “large” and “expedited” buttons on the website were effectively please-charge-me-more-money-for-absolutely-no-reason buttons. Click here…
This is much like buying a product placed at the end of the isle in the grocery store… marked up for convenience compared to the same product picked from further back in the store, on the isle where it would normally reside. I suspect most people don’t realize the price of a product may vary within the same store, depending on where you grab it off the shelf. The end of the isle is prime real estate and commands a premium.
(OK, how many of you tried to click that unclickable red button above? A true entrepreneur would have linked that to a credit card payment for $2.57 just to see how many of you would donate for the humor of it. I could have made $5.14. Thanks Mom… and Sofie.)
As I began to question the ethics of charging people different amounts for the same product, we turned off the website completely because it was nearly Christmas, and we didn’t want to pack boxes and ship product over the holidays. Instead, we spent time with the family. Good decision.
In all likelihood, we missed the bulk of the sales for the holiday season by closing shop early. Hundreds of missed kisses, potential romances, and some face slaps vaporized across the nation, a consequence of the early closure of our little experiment.
We sold something like $1,400 of mistletoe between Thanksgiving and pre-Christmas. Not bad for a young couple selling a parasite a few hours per week.
Better yet, our cost-of-goods was close to zero, so gross margins were ~100%. We just drove down the road every few days, pulled over and cut the low hanging mistletoe from the trees near the road and in nearby parks. Someone needed to do this anyway.
Turns out, we considerably thinned the mistletoe within a quarter mile of our apartment. We had to start bringing a step ladder if we wanted to continue sourcing product close to home. There was no more low hanging… parasite.
Our mistletoe adventure not only created a fun story, it was also an interesting experiment, packed with residual, lingering business lessons considerably greater than the business itself. I have applied some of these lessons within my own company over the years:
- Simplify your product and service, especially early on. Complexity always has a way of finding you. Don’t start with complexity.
- Everything hasn’t already been done. Most great ideas have yet to be conceived. And once those have been done, even better ideas are still on the horizon.
- Few markets are too competitive.
- Every market is re-imaginable and re-inventable.
- With the power of the internet and the long tail distribution of product demand, you can now go from basic idea to viable business in 24 hours. This was an amazing realization.
And the most important lesson…
We learn by doing, especially if we stop to contemplate, and to extract more generalized lessons from the experience. Mining for wisdom within the sequence of memories formed and implanted by our actions is a good exercise across all our experiences, both in business and in life.
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- Over time, we have both realized it’s quite nice to be the passenger. You get to look around and even daydream (my specialty) while en route. Consequently, we spend time thinking of ways to trick the other person into driving. And by “we” I mean “Sofie”. She’s stealthy. Here’s a typical scenario… maybe I’m in the garage, preoccupied putting on my shoes and talking about some esoteric topic of little consequence, but for the purposes of this example, we’ll call it “talking about something exceptionally meaningful”. As this transpires, Sofie will casually walk by and hand me the car keys on her way to the passenger side of the car. When you’re doing other tasks, like putting on your shoes and simultaneously solving the world’s problems, you normally just absentmindedly take whatever your spouse hands you. Why else would she hand me something unless I needed it, or she needed me to temporarily hold it for her? By the time I finish tying my shoes and look up, Sofie is already sitting in the passenger seat, door closed, ready to go. And I’m standing there, keys in hand, looking at an empty driver’s seat and wondering how all that happened without me noticing. Looks like I’m driving, again.
- This was back in the early, early days of Google Adwords… back when it was super economical and provided a good return on investment. I don’t think this is still the case (generally speaking).
- Without our mistletoe, there might be some form of romantic privation over the holidays. So, we were doing our part.